Clearwater Paper Reports Strong First Quarter Earnings
May 5, 2011 - Clearwater Paper Corporation today reported financial results for the first quarter of 2011.
Clearwater Paper acquired Cellu Tissue Holdings, Inc. on December 27, 2010. The first quarter of 2011 is the first full period in which Cellu Tissue's results have been included in the company’s financial statements, which inclusion represents the primary reason for many of the variances in the first quarter of 2011 compared to first quarter 2010 results.
The company reported net earnings of $5.6 million, or $0.47 per diluted share, for the first quarter of 2011, compared to net earnings of $0.5 million, or $0.04 per diluted share, for the first quarter of 2010.
The first quarter 2011 results include a net tax charge of $1.9 million, or $0.16 per diluted share, related to a mixture of discrete tax items and also an $11.4 million pre-tax charge, or $0.62 per diluted share, for scheduled major maintenance costs. The first quarter 2010 results included a one-time net tax charge of $4.4 million, or $0.37 per diluted share, resulting from the passage of the Patient Protection and Affordable Care Act of 2010 and also scheduled pre-tax major maintenance costs of $16.9 million, or $0.95 per diluted share.
The first quarter 2011 earnings before interest, taxes, depreciation and amortization, or EBITDA, was $41.7 million compared to $22.4 million in the first quarter of 2010.
"We are on schedule and on budget with the build out of our tissue facilities at Shelby, North Carolina,” said Gordon Jones, chairman, president and chief executive officer. “The converting equipment and warehousing is being brought up to speed and we are continuing work related to the paper machine.
“We also continue to make very good strides with the integration of Cellu Tissue,” said Jones. “Our people, operations and businesses are working very well together.
“As a result of the integration, we expect synergies to partially offset some of the higher pulp and transportation costs we have been experiencing in our tissue business, and we have announced our intention to raise tissue prices to help further offset these cost increases.
“Despite the cost challenges, we remain positive about both of our segments for the rest of 2011,” concluded Jones.
FIRST QUARTER 2011 SEGMENT PERFORMANCE
- Net sales in the Consumer Products segment were $269.3 million for the first quarter of 2011, as compared to first quarter 2010 net sales of $137.8 million. The increase in net sales was primarily attributable to the inclusion of Cellu Tissue's operating results for the full quarter.
- Operating income for the first quarter of 2011 was $13.8 million, compared with operating income of $26.0 million for the first quarter of 2010. The decline in operating income was primarily due to lower average profit margins resulting from the inclusion of Cellu Tissue products and higher pulp and transportation costs in the first quarter of 2011.
- Tissue volume increased to 129.6 thousand tons in the first quarter of 2011 as compared to 52.5 thousand tons in the first quarter of 2010, with the increase primarily attributable to the addition of Cellu Tissue volumes. Including Cellu Tissue in our first quarter 2010 results would have resulted in a pro forma volume of 130.4 thousand tons. The small decline in tons sold by the combined company was primarily due to a reduction of parent roll sales that were used internally for converted cases and a fire in the pulp storage warehouse at our Wiggins facility that resulted in decreased production on both of its paper machines.
- Net selling prices declined 20.9% to $2,078 per ton in the first quarter of 2011 versus the first quarter of 2010 due primarily to the inclusion of Cellu Tissue products in the total product mix for the 2011 period, as Cellu Tissue’s operations have a broader range of products and tissue grades than the legacy Clearwater Paper facilities. In addition to converted products, the Cellu Tissue operations included approximately 50 thousand tons of parent roll sales, which in general have significantly lower net selling prices. Including Cellu Tissue operations in our first quarter 2010 results would have produced, on a pro forma basis, an average selling price of $2,010 per ton for the combined operations.
- Volume and pricing data is available in the Events & Presentations portion of the Investor Relations page on the company’s website in an attachment called Supplemental Materials.
Pulp and Paperboard
Net sales of $196.6 million for the first quarter of 2011 were up 2.0% compared to first quarter 2010 net sales of $192.8 million. Operating income for the quarter rose to $15.6 million, compared to an operating loss of $7.9 million for the first quarter of 2010.
- Higher net sales for the quarter were driven by 11.6% increases in both paperboard pricing and pulp pricing as compared to the first quarter of 2010.
- In the first quarter of 2011, we increased the internal consumption of company produced pulp by starting to supply the Cellu Tissue operations and utilizing internal pulp during our maintenance downtime. This increase in the internal use of pulp in the first quarter of 2011 reduced our external pulp shipments by 43.3% compared to the first quarter of 2010. Paperboard shipments in the first quarter of 2011 were down 9.7% compared to the first quarter of 2010 due to stronger demand in the first quarter of 2010.
- The pulp and paperboard segment incurred $11.4 million in scheduled major maintenance costs during the first quarter of 2011 versus $16.9 million in the first quarter of 2010.
The effective income tax rate for the first quarter of 2011 was 52.2%, compared to an effective rate of 92.7% for the first quarter of 2010. The estimated annual effective tax rate for 2011, without discrete items, is expected to be approximately 35.8%.
Note Regarding Use of Non-GAAP Financial Measure
In this press release, the company presents its results for the first quarter of 2011 and 2010, including EBITDA. The EBITDA amounts are not in accordance with generally accepted accounting principles (GAAP) and accordingly a reconciliation of EBITDA to net earnings determined in accordance with GAAP is included at the end of this press release.
Clearwater Paper manufactures quality consumer tissue, away-from-home tissue, parent roll tissue, machine glazed tissue, bleached paperboard, pulp and wood products at 14 manufacturing locations in the U.S. and Canada. The company also produces bleached paperboard used by quality-conscious printers and packaging converters.
SOURCE: Clearwater Paper Corp